1843.

Ex parte MUSGROVE.

Court, the other fiat not having been annulled for want of prosecution; Ex parte Thomas (a). If the leave of the Court be requisite, this is not a case in which such leave will be given; for the petitioners do not show any act of bankruptcy to have been committed. The nonpayment of the debt at the end of the fourteen days, is not an act of bankruptcy; because the existence of the fiat would have rendered it an act of bankruptcy to pay the debt to the petitioning creditors under the 6 Geo. 4. c. 16. s. 8. (b); and nothing so absurd can have been the intention of the legislature, as to provide that nonpayment should be an act of bankruptcy, where the payment would be an act of bankruptcy. [The Chief Judge. I did not mean in Ex parte Thomas to decide the question, as to the propriety of obtaining the leave of the Court, before a new fiat was sued out by the same petitioning creditor, who had sued out one, which had been annulled for want of the legal requisites. All I meant to

(a) Ante, p. 307.

(b) 6 Geo. 4. c. 16. s. 8. "That if any such trader liable by virtue of this act to become bankrupt shall, after a docket struck against him, pay to the person or persons who struck the same, or any of them, money, or give or deliver to any such person any satisfaction or security for his debt or any part thereof, whereby such person may receive more in the pound in respect of his debts than the other creditors, such payment, gift, delivery, satisfaction or security shall be an act of bankruptcy, and if any commission shall have issued upon the docket so struck as aforesaid, the Lord Chan cellor may either declare such commission to be valid and direct the same to be proceeded in, or may order it to be superseded, and a new commission may issue, and such commission may be supported either by proof of such last-mentioned or any other act of bankruptcy, and every person so receiving such money, gift, delivery, satisfaction or security as aforesaid, shall forfeit his whole debt, and also repay or deliver up such money, gift, satisfaction or security as aforesaid, or the full value thereof, to such person or persons as the Commissioners, acting under such original commission, or any new commission, shall appoint, for the benefit of the creditors of such bankrupt."

decide was, that, if he succeeded in obtaining a fiat from the office, without the leave of the Court, such a fiat was not necessarily bad. I gave no opinion on the general practice, which ought, however, to be settled in one way or the other.] The petitioners must deliver themselves from this dilemma; either the Order of the Court is unnecessary, or, if it be necessary, they have made no case to entitle them to it. It is impossible, that any Court could hold an act of bankruptcy to have been committed.

Mr. Anderdon, in reply.

The CHIEF JUDGE.-Without giving any opinion, as to whether an act of bankruptcy has been committed, I am not disposed to interpose a bar to the petitioners' incurring the peril of suing out a new fiat, if they shall be so advised.

Mr. Anderdon. They would prefer being guided by the opinion of the Court, as to the validity of the act of bankruptcy.

The CHIEF JUDGE.-I have no jurisdiction to decide that question upon this application.

[Upon both parties requesting his Honour's decision on this point, and agreeing to be bound by it, the question as to the validity of the act of bankruptcy was then argued.]

Mr. Anderdon. The only objection made to the validity of the act of bankruptcy, arising on nonpayment of the debt, is, that the petitioner could not pay it, without committing an act of bankruptcy under the 6 Geo. 4.

1843.

Ex parte MUSGROVE.

1843.

Ex parte MUSGROVE.

c. 16. s. 8. But, to bring the payment within that provision, the existence of an invalid fiat is not enough. The status of bankruptcy must really exist; an act of bankruptcy must have been committed. The words of the section are, "if any such trader, liable by virtue of this act to become bankrupt." Now a trader would not be liable to become bankrupt, unless he had committed an act of bankruptcy. [The Chief Judge. Are not those words merely a part of the definition of a person liable to become bankrupt, by reference to the terms of the 2d section of the act?] Your Honour refused to decide in Er parte Smith (a), that such a payment, as that now in question, would be within the act. [The Chief Judge. I left the question entirely open, and expressly guarded myself against being misunderstood, as deciding points which I intended to leave untouched.] The payment, to be within 6 Geo. 4. c. 16. s. 8., must be one by which the petitioning creditors may receive more in the pound than the other creditors. It is clear, that, in order to bring the case within the operation of the clause, there must be a corrupt bargain between the trader and the petitioning creditor. No other case could have been contemplated by the act. And it cannot be supposed, that the 8th section of 6 Geo. 4. c. 16. was overlooked, when the new statute 5 & 6 Vict. c. 122. was passed, the 14th section of which makes the want of payment or security, according to the terms of the clause, an act of bankruptcy in every case.

The CHIEF JUDGE. In Ex parte Smith (a) you argued, Mr. Russell, that, if a fiat were issued against the richest merchant in London, without any foundation, (a) Ante, p. 144.

he could not pay the petitioning creditor's debt, without committing an act of bankruptcy under the 6 Geo. 4.

c. 16. s. 8.

Mr. Russell, amicus curiæ. My argument there coincided with my own opinion upon the construction of the section.

Mr. Anderdon. I submit, that this cannot be the right construction of the clause; the fiat, which it contemplates, must be one capable of being worked for the benefit of the body of creditors; and the transaction between the trader and the petitioning creditor, to come within the meaning of the act, must be a bargain to the disadvantage of other creditors; which could not be the case here, as the fiat could not stand, for want of the legal requisites.

Mr. Swanston, and Mr. Sturgeon. In another case of Ex parte Smith (a), the petitioning creditor would not accept payment in full, without the direction of the Court, although the assets realized were much more than sufficient to pay 20s. in the pound, from fear of the operation of the 8th section of the 6 Geo. 4. c. 16., as two creditors to a small amount had not in fact been paid, they having declined to prove.

VICE-CHANCELLOR KNIGHT BRUCE, C. J.-In the present case, I think one Order may be made on both petitions. That the existing fiat must be annulled, is admitted on both sides; and, according to the ordinary course the course which must be followed, unless a

(a) 2¡G. & J. 291.

1843.

Ex parte MUSGROVE.

1843.

Ex parte MUSGROVE.

case can be made on the part of the petitioning creditors for a different decision,-the fiat must be annulled, with costs, not only of this application, but of annulling the fiat.

It is however contended, on the part of the petitioning creditors, that these costs ought to be diminished, by reason of an offer made by their solicitor, in the course of the vacation, to annul the fiat, without the necessity of coming to the Court itself; and that, inasmuch as that offer was not accepted, the costs ought to be decreased.

The material circumstances as to that part of the case are these. The proposed Order was to annul the fiat, with costs of the application, without adding " the costs of annulling the fiat, and incidental thereto," the form of Order, which, as I understand, would be according to the usual course of the Court. The objection, however, that these words were omitted, was not taken on behalf of the alleged bankrupt. Those who advised him insisted on the addition of other words, which are unusual, and which are not according to the ordinary practice. They also insisted on the petitioning creditors giving an undertaking not to issue another fiat; but they did not, as I have said, object that the words "the costs of annulling the fiat, and incidental thereto" were not included in the proposed Order. I think, that the terms and conditions suggested on behalf of the alleged bankrupt were untenable.

Both parties therefore were in error, as regards the terms of the proposed Order; but I cannot help thinking it probable, that, if the advisers of the alleged bankrupt had said that the proposed Order was not according to the ordinary course, those who were concerned on behalf of the petitioning creditors would have acceded to the Order being drawn up in the usual form.